This chapter discusses inventory management concepts including opposing views of holding inventories, the nature of inventories, fixed order quantity systems, and determining order points. It describes why companies want and don't want to hold inventories. Fixed order quantity systems use economic order quantity models to determine optimal order sizes based on costs. Order points are set based on expected demand during lead time plus a safety stock to achieve a desired customer service level.

13. Independent vs. Dependent Demand A Independent Demand (finished goods and spare parts) B(4) C(2) D(2) E(1) D(3) F(2) Dependent Demand (components)

16. Balancing Carrying against Ordering Costs Annual Cost ($) Order Quantity Minimum Total Annual Stocking Costs Annual Carrying Costs Annual Ordering Costs Total Annual Stocking Costs Smaller Larger Lower Higher EOQ

77. Miscellaneous Systems: Optional Replenishment System Maximum Inventory Level, M M Actual Inventory Level, I q = M - I I Q = minimum acceptable order quantity Decision rule: If q > Q, order q, otherwise do not order any

78. Miscellaneous Systems: Bin Systems Two-Bin System Full Empty Order One Bin of Inventory when one is emptied One-Bin System Periodic Check Order Enough to Refill Bin (e.g. check book)

80. End of Chapter 14